G8 Action Plan on Poverty
G8 Action Plan: Applying the Power of Entrepreneurship to the Eradication of Poverty

The UN Commission on the Private Sector and Development has
stressed that poverty alleviation requires a strong private sector. It
is the source of growth, jobs and opportunities for the poor. The
Monterrey Consensus also made clear that achieving lasting development
requires the use of all relevant resources, including the role of the
private sector as a vital engine of economic growth, job creation and
poverty reduction. Enabling the private sector to help poor people
prosper should become systematically integrated into development
assistance efforts. Developing countries need to create the conditions
in which entrepreneurs can build successful businesses and families can
access formal financial markets at reasonable prices.

G8 countries have agreed on the following set of actions to
encourage and support national policies and programs that promote
effective private sector-led development to help alleviate poverty,
thereby helping to achieve the international development goals of the
Millennium Declaration. G8 countries will work to ensure that
bilateral and multilateral assistance help to mobilize capital and
expertise to accelerate growth and free up resources for productive use
by people in developing countries. These innovative programs are
intended to support the efforts that developing countries are
undertaking themselves. This approach complements official development
assistance, which remains crucial for poverty alleviation.

To highlight and disseminate best practices in this private-sector
approach to development, the G8, together with relevant international
organizations, will sponsor a conference in the fall of 2004 involving
private sector representatives and developing and developed country
governments.

Facilitating Remittances to Help Families and Small Businesses

The flow of remittances across international borders, mostly a few
hundred dollars at a time, is growing rapidly and now totals nearly
$100 billion per year. This money is the fruit of the work of
immigrants and plays an increasing role in the financing of development
in the workers home countries. Remittances can therefore play a key
role in private-sector development efforts, enabling families to
receive needed capital for, for example, education, housing and small
business start-ups and expansion. But transaction costs can be high
as much as 10 to 15 percent even for flows to large, urban markets.
Attracting remittance flows into formal channels can strengthen
financial systems in developing countries and reduce the risk that
remittances will be diverted for illicit purposes. G8 countries will
work with the World Bank, IMF, and other bodies to improve data on
remittance flows and to develop standards for data collection in both
sending and receiving countries. G8 countries will also lead an
interna

To accomplish this, we will take actions, including through pilot
partnerships and programs, with developing countries on remittances.
The G8 programs listed in the attached annex, and others that we
contemplate, will:

1. Make it easier for people in sending and receiving
countries to engage in financial transactions through formal financial
systems, including by providing access to financial literacy programs,
where appropriate, and by working with the private sector to extend the
range and reach of these services.

2. Reduce the cost of remittance services through the
promotion of competition, the use of innovative payment instruments,
and by enhancing access to formal financial systems in sending and
receiving countries. In some cases, remittance costs between sending
and receiving countries have been reduced by up to 50 percent or
more. G8 countries believe that similar reductions of high costs
could be realized in the case of other countries.

3. Promote better coherence and coordination of international
organizations that are working to enhance remittance services and
heighten the developmental impact of remittance receipts in developing
countries.

4. Encourage cooperation between remittance service providers
and local financial institutions, including microfinance entities and
credit unions, in ways that strengthen local financial markets and
improve access by recipients to financial services.

5. Encourage the creation, where appropriate, of
market-oriented local development funds and credit unions that give
remittance-receiving families more options and incentives for
productively investing remittance flows.

6. Support dialogue with governments, civil society, and the
private sector to address specific infrastructure and regulatory
impediments. For example, governments should ensure non-discriminatory
access to payment systems for the private sector, consistent with
strong supervisory standards, and work together to modernize overall
financial infrastructure.

Improving the Business Climate for Entrepreneurs and Investors

Businesses can thrive only if countries provide transparent
regulatory and legal frameworks, lower the barriers to starting and
operating companies, and provide adequate infrastructure. G8 countries
endorse and will seek to supplement the good work that the UN and its
Commission on the Private Sector and Development, the World Bank, IDB,
IFC, the OECD, and other institutions have been doing to improve the
climate for enterprise and investment in the developing world. In
particular, we support the work of the World Bank to identify
quantitative indicators for the costs and benefits of business
regulations across countries.

G8 countries will work with the multilateral development banks
(MDBs), UNDP, and other UN agencies and international organizations
to:

7. Support coordinated, country-specific MDB action plans to
address key impediments to the business environment. The action plans
should have timetables to achieve measurable results.

8. Encourage the MDBs to incorporate these action plans into
their country strategies and budgets, and report annually on the
progress made in conducting investment climate assessments and action
plans.

9. Encourage the MDBs to enhance their lending and technical
assistance programs for small and medium-sized enterprises (SMEs) over
the next three years with clear, results-based objectives, and to
develop these plans by September. For example, the EBRD has introduced
a successful small business program, combining technical assistance and
capital, which has resulted in five hundred thousand loans to SMEs over
the last ten years.

The G8 will work with developing countries to develop pilot
projects and support actions to:

10. Assist committed countries to launch comprehensive programs
and reforms to improve their business and investment climates, working
with the MDBs and other international bodies such as the OECD.

11. Help drive down the cost and time to start businesses in
developing countries.

12. Support efforts highlighted in the UN Commission on the
Private Sector and Development to assist the evolution of informal
businesses into the formal sector.

13. Help promote investment compacts, similar to OECD work in
the Balkans, in which countries commit to implement structural policy
reform in order to help attract increased private investment.

14. Support the work of international bodies, such as the World
Bank and African Development Bank, in promoting macroeconomic, legal
and regulatory reforms to establish an efficient and transparent
business climate appropriate to the unique challenges faced by poorer
countries.

15. Help develop business-to-business links to promote
commercially viable projects and to match investors, exporters, and
service providers through entrepreneurial conferences and smaller
sectoral meetings.

16. Support developing countries ability to attract
knowledge-based investment and promote innovation by working with them
to curb piracy and counterfeiting, which increasingly damage domestic
as well as international business.

17. Promote good corporate governance, including through
cooperation with the OECD/World Bank Global Corporate Governance Forum,
and through technical assistance to develop or improve financial
regulatory bodies.

18. Promote adoption of measures to improve transparency in
fiscal policy and public procurement, to improve the climate for
investment and responsible use of government resources.

19. Promote and facilitate investment opportunities in
developing countries, including through the negotiation and
implementation of investment treaties.

Providing Housing and Clean Water by Supporting the Development of
Local Financial Markets

G8 countries recognize that strengthening local financial markets
is fundamental to promoting a vibrant private sector in developing
countries. This year, the G8 will concentrate on two aspects of
financial market development by carrying out pilot projects to meet the
needs of people for housing and clean water. Specifically, we will:

21. Work with the MDBs and other organizations to facilitate
the establishment of the fundamental components of mortgage markets,
including property rights, title transfer, credit risk management,
legal and regulatory frameworks, funding sources, and the operational
capacity of mortgage lenders.

22. Seek to provide opportunities for recipients of remittance
inflows to utilize that income efficiently in domestic financial
markets, including for building and improving their homes.

23. Help develop sub-sovereign bond markets to provide water
and sanitation by building on relevant commitments in the G8 Evian
water action plan, including technical assistance to design instruments
and the legal and institutional frameworks necessary for market
acceptance. We welcome the ongoing work of the World Bank on this
issue.

25. Promote the development of pooled funds, backed by
homeowner associations, to pay for local water projects.

Expanding Access to Microfinance for Entrepreneurs

Entrepreneurs, no matter how small, need access to capital.
Microfinance programs have provided small amounts of capital to
entrepreneurs for many years -- benefiting women in particular.
Sustainable microfinance can be a key component in creating sound
financial market structures in the worlds poorest countries. It is
often the first step in launching SMEs, the beginning of what should be
a continuum of credit access necessary to support the maturation of
companies in developing countries. In anticipation of the
UN-designated international year of micro-credit in 2005, G8 countries
will work with the World Bank-based Consultative Group to Assist the
Poor (CGAP) to launch a global market-based microfinance initiative.
To assess the status and effectiveness of current microfinance
programs, G8 countries will work with CGAP to promote best practices in
microfinance for developing countries. We endorse the Key Principles
of Microfinance, compiled by CGAP and its members and will work with
CGAP on ways t

26. Focus on institutional best practices for expanding and
mainstreaming sustainable microfinance.

27. Develop a microfinance institution code of conduct based on
CGAPs efforts to identify key principles for microfinance lending.

28. Reduce barriers for growing microfinance institutions to
gain access to domestic and international capital markets.

29. Encourage, where needed, the establishment and expansion of
self-sustaining microfinance investment funds.

30. Assist developing countries to improve their legal and
institutional frameworks for microfinance so it can become sustainable
and more widely available.

Remittances Annex to: G8 Action Plan: Applying the Power of
Entrepreneurship to the Eradication of Poverty

Canada: Canada is exploring the scope for more cost-effective
remittance arrangements with a number of partner countries in Asia and
the Caribbean. These partnerships will encourage financial
institutions to broaden access to their services and pursue
increasingly innovative products. Canada also intends to focus efforts
on increasing financial literacy and improving the quality of
remittance data.

France: With a view to supporting the individual strategies of
migrants from Morocco, Mali, Senegal and the Comoros for investing in
their home countries, France is conducting a joint co-development
policy with 2 objectives, namely reducing the cost of remittances and
prompting banking partners to allocate loans for productive investment
locally. Projects are also co-financed, with associations of migrants
living in France, in their villages and regions of origin. Finally, aid
in the form of financial support and training may be granted to Malians
and Senegalese wishing to go home to carry out a rehabilitation
project.

Germany: Recorded remittances flows out of Germany reached 3.3
billion last year. The major beneficiary country is Turkey with 1
billion. Germany is already successfully working together with Turkey
and has significantly reduced the cost of remittances. For years, this
cooperation has improved services to migrants and their families and
has offered efficient transfer opportunities in the formal sector while
maintaining supervisory standards.

Italy: Over the last few years, remittance flows from Italy have
significantly increased (to 6 billion in 2003). Italy has developed an
Action Plan aimed at attracting immigrants remittances into official
financial channels and promoting the development of innovative payment
technologies; addressing statistical issues; encouraging the use of
remittances as a tool for economic growth and development in countries
of origin. Several initiatives have already been launched or are under
consideration, such as pilot projects on microfinanceremittances,
especially with countries in North Africa (Morocco in particular), the
Balkans and Sub-Saharan Africa.

Japan: Remittance flows out of Japan amounted to 335 billion in
2002. Innovative products have enhanced accessibility to banks, and
significant reductions of remittance fees have been realized. Japan
will work together with major recipient countries, such as Malaysia and
the Philippines, to conduct joint surveys on remittance flows, to
formulate concrete plans to increase access to financial institutions
in the rural areas of receiving countries, to promote educational
programs for migrant workers traveling to Japan, and to explore other
measures to facilitate remittances.

Russia: Remittances from the Russian Federation play an important
role in the development of a number of CIS countries, including
Moldova, Georgia, Azerbaijan, Armenia, Kyrgyz Republic, and Tajikistan.
Russia will explore with one or several of these countries partnerships
to improve the framework for remittance flows, to encourage
diversification of operations of local cost-effective money transfer
services, to increase financial literacy of migrant workers and to
improve quality of remittance data.

United Kingdom: The UK is developing remittance partnerships with,
initially, two countries that receive significant remittance flows from
the UK. These partnerships will build on current UK-supported
programs, such as those with the FinMark Trust in southern Africa, to
strengthen the financial sector, reduce barriers to remittance flows,
and improve access to affordable and efficient remittance services.

United States: The United States and the Philippines, the third
largest recipient of remittances globally ($8 billion last year with
approximately half coming from the U.S.), have agreed to work together
to: reduce the cost of sending remittances by fostering competition and
the adoption of efficient transmission mechanisms; expand access to
remittance services and saving and investment vehicles; and ensure
compliance with counter-terrorist financing and anti-money laundering
standards.

European Commission: The flow of workers' remittances from the EU
is an important source of financing for third countries, including
countries neighboring the EU. The Commission is preparing a new legal
framework on EU payment services designed to increase the choice of
services, make remittance transactions more secure, and enhance
transparency and competition in the market. An EU program also assists
third countries in the area of migration and asylum, supporting
initiatives to reduce remittance transfer costs and to facilitate the
use of remittances for productive investments and development
initiatives.